It seems like an eternity, but it was only six years ago that every financial column in the Indian press and on the internet was releasing emphatic statistics about the boom in Indian art. The two main areas of focus were "modern" and "contemporary". The modern sector was led by the post-war "progressive school" of artists, Tyeb Mehta, FN Souza, MF Husain and SH Raza, few of whom are still alive. The contemporary sector was led by young artists Subodh Gupta ("the Damien Hirst of India") his wife, Bharti Kher, and Jitish Kallat – a group of artists whose works were collected by Charles Saatchi and Frank Cohen. As speculation grew, art investment funds in India popped up like mushrooms and prices soared.

But then, following the credit crunch and world wide banking collapse from late 2008, values plummeted and the whole investment structure collapsed. Now, five years later, the speculators and art funds have all gone; thousands have lost money on their investments. In terms of art values, the moderns have just about picked up the pieces, but the Indian contemporary market is still flat.

According to the independent art market analysts, Art Tactic, the September 2013 sales of South Asian art at Christie’s, Sotheby’s, and the Indian online auctioneer, Saffronart, were down 33.6 per cent from last year. So it comes as something of a surprise that Christie’s has chosen to hold it’s first sale of Indian art in Mumbai, India, a week before Christmas.

Dr Amin Jaffer of Christie’s explains. "The Indian market sprung to life in the early 90s with the liberalising of the Indian economy and its currency exchange. But the drivers of the market were high net worth Indians living abroad, mainly in America and the UK. The Indian art auctions have therefore been held in New York and London."

However, Christie’s has noticed an increase in art buying activity by wealthy resident Indians and believes that they would rather buy within the country than abroad. It’s a matter of convenience geographically, it gets around the restrictions on overseas spending, and it reduces the cost of transport and import tax, which currently stands at about 15 per cent. Their research also showed that local auctioneers, Pundole’s, Saffronart, and Astaguru, were beginning to report steady results with a joint turnover in the first six months of 2013 of 7.4 million dollars – which is not bad considering there was no auction market in India five years ago.

Christie’s had been thinking about conducting a sale in India for a couple of years when they were presented with the opportunity to auction 50 works from the collection of the recently deceased Mumbai gallery owners, Kekoo and Korshed Gandhy. The Gandhys had been in business since the 1940s and their collection includes works by internationally established artists (Raza, Mehta, Husain) as well as those known only by the Indian cognoscenti.

Another section of the sale is for works by historic figures such as Amrita Sher-Gil and Rabindranath Tagore that are considered national treasures and cannot be exported. Then there are some star lots have been sent from America by a collector who bought them in 2009 and thinks he is more likely to get his money back selling them in India than anywhere else.

Tyeb Mehta’s painting, Mahisasura (above), based on the myth of the warrior goddess, Durga, slaying the Buffalo Demon, is the top lot of the sale with a 1.2 million to 1.5 million dollar estimate. The painting’s market history captures the flow of the market over the last decade. In 2002 it was sold in New York by The Times of India Group in New Delhi for 107,550 dollars, about double the estimate. In 2009, it came back onto the market which was still strong for classic modern works, and sold for a double estimate 1.28 million dollars in New York. The question now is whether that price can be sustained in India.

The sale’s overall estimates of 6 to 8 million dollars is small in the scale of things, but it is as much about marketing and gaining access to high net worth individuals in India, says Jaffer. According to a recent wealth survey there are 1,760 individuals with wealth of over 50 million dollars and 770 with over 100 million dollars in India. Many of them will be excited about Christie’s initiative, and the sale, to be held at the prestigious Taj Mahal hotel in Mumbai, will be accompanied by glittering receptions and dinners. India’s star cricketer Sachin Tendulkar, for example, is hosting one, and with him batting on their side, who will bet against a win for Christie’s.